Good Deals 2014: Vince Cable and responsible capitalism

Transparency is crucial in Vince Cable's vision of responsible capitalism, as we learned last week  from the Good Deals conference which is loosely related to social enterprise. 

I can't disagree with that, since it has been part of our own practice. We share what we do openly. in the public domain.

In 2004, what we shared with the social enterprise community was a proposal for bottom up people-centred economic development making this key point:

"Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

We has put it into practice 5 years ealier in 1999 , by sourcing what became known as the Tomsk Regional Initiative - an experimental poverty relief project in Siberia. In 2004, our founder was interviewed by a disapora leader about a follow on project in Crimea where he said:

"Essentially, P-CED challenges conventional capitalism as an insufficient economic paradigm, as evidenced by billions of people in the world living in poverty in capitalist countries and otherwise. Under the conventional scheme, capitalism - enterprise for profit - has certainly transformed much of the world and created a new breed of people in capitalist societies, the middle class. That is a good thing. But, capitalism seems to have developed as far as it can to produce this new class of fairly comfortable people between rich and poor, at least in the West where it has flourished for quite some time.

The problem is that profit and money still tend to accumulate in the hands of comparatively few people. Money, symbolically representing wealth and ownership of material assets, is not an infinite resource. When it accumulates in enormous quantities in the hands of a few people, that means other people are going to be denied. If everyone in the world has enough to live a decent life and not in poverty, then there is no great problem with some people having far more than they need. But, that's not the case, and there are no rules in the previous capitalist system to fix that. Profit and numbers have no conscience, and anything done in their name has been accepted as an unavoidable aspect of capitalism."

Like both David Cameron and Ed Miliband, Vince Cable has jumped on the new capitalism bandwagon. 

Cameron came first when he pitched at Davos 2009, prompting me to petition him the following year whenhe took office as PM. I called for government support for the approach we'd deployed to raise awareness of institutional childcare abuse.

"I congratulate you on your recent election success and I'm inspired by the potential of the ethical capitalism you advocate.
"We're a UK based social enterprise working in Ukraine to advocate for social change. We've focussed in particular on disabled and institutionalised children."

As I wrote for McKinsay's MixMarket, we'd created impact in influencing Ukraine government policy yet had been undermined by a project hijack in which The British Council had a significant part.  As one may read, it was a call for impact investment:

“There is no substitute for a loving family environment for growing children. Existing state care institutions do not and cannot possibly provide this – despite occasional, lingering claims that state care is the best care for children. This attitude is a holdover from Soviet times when the state was idealized as the best possible caretaker for all, including children. Stark reality does not support that notion.

While this section has strong focus on financial aspects for reforming childcare in Ukraine, these are just financial numbers to demonstrate that this can be done for an overall, long-term cost reduction to state budget. That is to say, simply, this reform program is at the least financially feasible. The barrier between old and new is the cost of the transitional phase."

It was a doubled edged sword, in that paying taxes to government to fund the British Council, they were also a customer with a reluctance to pay invoices .

In my petition to Cameron, I'd referred to our work on what would be known as a 'Marshall Plan' for Ukraine which again had called for support for our approach, where profits are deployed for social benefit:

'This is a long-term permanently sustainable program, the basis for "people-centered" economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine's poorest and most desperate citizens, rather than a "top-down" approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first -- not secondarily, along the way or by the way. '

In a follow up call for support which went to USAID, The US Senate and Ambassador to Ukraine. we'd related the extent of corruption , which included the harvesting of stem cells for profit from foetuses:

"Then there’s another kids issue, that of baby parts. Allegations against maternity hospital number six here in Kharkiv, for one example I happen to know due to close proximity, have been investigated and confirmed by BBC and rapporteurs from Parliamentary Assembly of Council of Europe regarding killing healthy babies in hospital at birth and disappearing body parts into an international black market. At least one mass grave was located and disinterred, showing babies chopped to pieces with brains, internal organs, and apparently bone marrow having been removed. This was exposed by way of extraordinary bravery on the part of one young lady affiliated with Kharkiv Human Rights Group (KHPG). Why there is no criminal case about this, I do not know. Ask Kyiv, and observe what happens. BBC and PACE have all evidence."

What Vince Cable's appearance underlines is the vast distance, 10 years in this case, between those who have taken responsible capitalism into practice and the rhetoric of those  now promoting it. I was reminded of what Indira Gandhi was told by her grandfather. 

"There are two kinds of people in the world. Those who do the work and those who take the credit. Try to be in the first group, you'll find less competition"

Nobody provides a better illustration of the second group than David Cameron, who took our call for placing children in loving family homes and served it up as his own. 

Some ethics.

Soon after my petition to Cameron our founder was interviewed by Axiom news where he argued the case for a non dividend investment strategy: to rescue children left to die in remote institutions. This was August 2010.

“When we get into divvying up financial profits it’s too easy to get sidetracked by a myriad of possibilities along those lines,” Hallman tells Axiom News.

“In that case there is distraction from the primary objective of any given project, the social concerns for people at risk of exclusion, or already excluded, from the opportunity to have a decent, safe, secure life.”

Hallman adds that if “a lot of emphasis is placed on financial returns, the usual suspects can and will get in, figure out to how strip out the social aspects of social businesses and keep all profits to themselves.”

“Think of the corporate raiders on the loose in the U.S. in the 1980s. Same thing. That mindset is the driving force that has created such need for social businesses to begin with.”

So where were the social investors?

Adam Smith had argued that an Invisble Hand benefits society through pursuit of self interest. it's being taken one step further by social investment with the self aggrandising concept of an Invisible Heart:

 

What Sir Ronald Cohen told investors in 2002 about a 'curtain of fire' through inequality was the same warning made in 1996 to Bill Clinton, by the man who put responsible capitalism into practice, starting in Tomsk. A warning that was repeated in Crimea;

"By leaving people in poverty, at risk of their lives due to lack of basic living essentials, we have stepped across the boundary of civilization. We have conceded that these people do not matter, are not important. Allowing them to starve to death, freeze to death, die from deprivation, or simply shooting them, is in the end exactly the same thing. Inflicting or allowing poverty on a group of people or an entire country is a formula for disaster.

These points were made to the President of the United States near the end of 1996. They were heard, appreciated and acted upon, but unfortunately, were not able to be addressed fully and quickly due primarily to political inertia. By way of September 11, 2001 attacks on the US out of Afghanistan – on which the US and the former Soviet Union both inflicted havoc, destruction, and certainly poverty – I rest my case. The tragedy was proof of all I warned about, but, was no more tragedy than that left behind to a people in an far corner of the world whom we thought did not matter and whom we thought were less important than ourselves.

We were wrong."

.Earlier this year, that same President, Bill Clinton showed up at yet another conference on Inclusive Capitalism. I wan't alone in noting the irony of this exclusive conference. This time, It was the City of London Lord Mayor, Fiona Woolf who regurgitated our warning from 10 years ago,

"If too many people remain or become marginalised, they are less likely to be enfranchised, empowered and effective as workers and citizens, rendering them unable to make an economic contribution at best, and resulting in civil unrest at worst. Everything a firm does from the very top to the very bottom should demonstrate on a daily basis our desire to see a stronger, better evolution of capitalism. "

I wrote an open letter pointing out where this had come from, and what it had cost in terms of human life.

Almost as she spoke, the civil unrest we had warned about for so long in Ukraine had turned to violent uprising and people were dying on the streets. We had warned about it again in the 'Marshall Plan'    

"We see a staggering array of social problems arising directly from poverty, including but not limited to tens of thousands of children in orphanages or other state care; crime; disrespect for civil government because government cannot be felt or seen as civil for anyone left to suffer in poverty; young people prostituting themselves on the street; drug abuse to alleviate the aches and pains of the suffering that arises from poverty and misery; HIV/AIDS spreading like a plague amidst prostitution, unprotected sex, and drug abuse; more children being born into this mix and ending up in state care at further cost to the state; criminals coming from poverty backgrounds, ending up as bandits, returning to communities after prison, with few options except further criminal activity. These are all part and parcel of the vicious negative cycle of poverty, and this threatens to destroy Ukraine, if Ukraine is defined in terms of people rather than mere geographic boundaries."

In 2008, this crisis and the 'Marshall Plan' had been introduced to the EU through the vehicle of the EU Citizens Consultation. Next month, December 2014, the EU will be presented with another 'Marshall Plan' which has a price tag of 30 billion dollar. It comes from a right wing political group which has no representation in the UK. about this IP hijack

We are now facing a new Cold War. It didn't have to be this way.

Responsible capitalism, if such a thing is something I've described as The New Bottom Line and there are others now coming to similar conclusions about business which embeds both social and environmental benefit. Paul Polman of Unilever for example. who writes:

"It is nothing less than a new business model. One that focuses on the long term. One that sees business as part of society, not separate from it. One where companies seek to address the big social and environmental issues that threaten social stability. One where the needs of citizens and communities carry the same weight as the demands of shareholders."

Could there have been any greater threat to social stability than that which I have related above?